Stifel Comments On Relypsa M&A Rumors: 'Timing Could Be Tricky'
Shares of Relypsa Inc (NASDAQ: RLYP) gained 67.61 percent on Thursday on renewed rumors of a possible buyout. According to Reuters, the company has hired an advisory firm, responding to “a number of overtures from potential buyers.”
On Thursday afternoon, analysts at Stifel said “the price movement is expected given the >40% short interest (per Bloomberg) currently outstanding on the name – short interest that has largely manifested as a result of financing concerns (FY16 OpEx guidance > YE15 pro forma cash).”
While Stifel has no knowledge of specific M&A discussions, they noted the topic of M&A optionality has been quite popular among investors in recent months, particularly taking into account the current balance sheet and the firm’s estimate that roughly $500 million of additional resources will be needed “to eventually bridge this story to sustainable profitability in FY20.”
“Timing could be tricky with a ZS9 approval on the horizon,” the report said.
AstraZeneca plc (ADR) (NYSE: AZN), which acquired ZS Pharma last November, has a May 26 PDUFA date for ZS9, and this poses the risk of some restrictive labeling, the analysts said. On the other hand, Relypsa’s Veltassa seems to have “a blood pressure-lowering effect – and the potentially stark contrast in product characteristics here could prove to have a meaningful impact on longer-term share gains in this space.”
Consequently, the analysts think a deal ahead of a formal ZS9 label print “could prove challenging.”
Having said this, Stifel estimates a takeout price could stand around $75 per share. However, “a price point here will be largely influenced by the competitiveness of the process – and we’re inclined to believe there’s ample demand here given the number of prior suitors known to have engaged in procedural discussions with investment banking representatives during the ZS Pharma M&A process.”
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
Latest Ratings for RLYP
|Sep 2016||BTIG Research||Terminates||Neutral|
|Aug 2016||Stifel Nicolaus||Downgrades||Buy||Hold|
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